SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to '240.14a-11(c) or '240.14a-12
STANDARD MANAGEMENT CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1)Title of each class of securities to which transaction applies:
2)Aggregate number of securities to which transaction applies:
3)Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11
(Set forth the amount on which the filing fee is calculated and state how
it was determined):
4)Proposed maximum aggregate value of transaction:
5)Total fee paid:
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1)Amount Previously Paid:
2)Form Schedule or Registration Statement No.:
3)Filing Party:
4)Date Filed:
TO THE STOCKHOLDERS OF
STANDARD MANAGEMENT CORPORATION
You are cordially invited to attend the 1999 Annual Meeting of Stockholders of
Standard Management Corporation to be held at 9:30 a.m., local time, on
Thursday, June 10, 1999 at the Indianapolis Marriott North, 3645 River
Crossing Parkway, Indianapolis, Indiana 46240.
The matters to be considered at the meeting are described in the accompanying
Notice of Annual Meeting of Stockholders and the Proxy Statement.
Regardless of your plans for attending in person, it is important that your
shares be represented at the meeting. Therefore, please complete, sign, date
and return the enclosed proxy card in the enclosed, post-paid envelope. This
will enable you to vote on the business to be transacted whether or not you
attend the meeting.
We look forward to seeing you at the 1999 Annual Meeting.
Sincerely,
Ronald D. Hunter
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
May 3, 1999
<PAGE>
STANDARD MANAGEMENT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1999
TO THE STOCKHOLDERS OF
STANDARD MANAGEMENT CORPORATION:
The Annual Meeting of Stockholders (the "Annual Meeting") of Standard
Management Corporation ("SMC" or "the Company") will be held at 9:30 a.m.,
local time, on Thursday, June 10, 1999, at the Indianapolis Marriott North,
3645 River Crossing Parkway, Indianapolis, Indiana 46240, to consider and vote
on the following matters:
Proposal 1.To elect three Class I directors to the Board of Directors of SMC
for a term of three years.
This item is more fully described in the accompanying Proxy Statement. In
addition, the stockholders will transact such other business as may properly
come before the Annual Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 26, 1999 (the
"Record Date") are entitled to notice of , and to vote at, the Annual Meeting
or any adjournments thereof.
Your attention is directed to the accompanying Proxy Statement, proxy card and
the Shareholders Annual Report. Whether or not you plan to attend the Annual
Meeting in person, you are urged to complete, sign, date and return the
enclosed proxy card in the enclosed, post-paid envelope. If you attend the
Annual Meeting and wish to vote in person, you may withdraw your proxy and vote
your shares personally.
By order of the Board of Directors
Stephen M. Coons
EXECUTIVE VICE PRESIDENT AND SECRETARY
May 3, 1999
Indianapolis, Indiana
<PAGE>
STANDARD MANAGEMENT CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 1999
GENERAL INFORMATION
This Proxy Statement is being furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors (the "Board of Directors") of
Standard Management Corporation ("SMC" or the "Company") for use at its 1999
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 9:30, a. m.
local time, on Thursday, June 10, 1999 at the Indianapolis Marriott North, 3645
River Crossing Parkway, Indianapolis, Indiana 46240.
Each stockholder of record of Common Stock of the Company (the "Common Stock")
on April 26, 1999 (the "Record Date") is entitled to vote at the Annual Meeting
and will have one vote for each share of Common Stock held at the close of
business on the Record Date. A majority of the shares entitled to vote will
constitute a quorum for purposes of the Annual Meeting. On March 31, 1999
there were 7,559,170 shares of Common Stock outstanding and entitled to vote.
A list of the stockholders of record entitled to vote at the Annual Meeting
will be available for inspection by any stockholder for any purpose germane to
the meeting, during normal business hours, for a period of ten days prior to
the meeting at the principal executive offices of the Company located at 9100
Keystone Crossing, Indianapolis, Indiana 46240. The telephone number at the
address is (317) 574-5221.
If you are unable to attend the Annual Meeting you may vote by proxy. The
proxies will vote your shares according to your instructions. If you return a
properly signed and dated proxy card but do not mark a choice on one or more
items, your shares will be voted in accordance with the recommendations of the
Board of Directors as set forth in this Proxy Statement. The proxy card gives
authority to the proxies to vote your shares in their discretion on any other
matter presented at the Annual Meeting. A proxy may indicate that all or a
portion of the shares represented thereby are not being voted by the
stockholder with respect to a particular matter. Any such non-voted shares
will be considered present for the purpose of determining the presence of a
quorum.
You may revoke your proxy at any time prior to voting at the Annual Meeting by
delivering written notice to Stephen M. Coons, the Secretary of the Company, by
submitting a subsequently dated proxy or by attending the Annual Meeting and
voting in person at the Annual Meeting.
The Company will bear the cost of preparing, handling, printing and mailing
this Proxy Statement, the accompanying proxy card and any additional material
which may be furnished to stockholders, and the actual expense incurred by
brokerage houses, fiduciaries and custodians in forwarding such materials to
beneficial owners of Common Stock held in their names. The solicitation of
proxies will be made by the use of the mails and through direct communication
with certain stockholders or their representatives by officers, directors or
employees of the Company who will receive no additional compensation for such
solicitation. This Proxy Statement and the enclosed proxy card were first sent
or given to stockholders on or about May 3, 1999.
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
Under the Company's Bylaws, the Board of Directors consists of nine persons and
is divided into three classes, each of whose members serves for a three-year
term. At the Annual Meeting, stockholders will elect three Class I directors.
The terms of the current Class I Directors expire with this Annual Meeting of
stockholders. Robert A. Borns, Jerry E. Francis and Raymond J. Ohlson are
presently directors of the Company. The nominees for Class I Directors, if
elected, will serve three years until the 2002 Annual Meeting of stockholders
and until their successors have been elected and qualified. The current Class
II and Class III directors will continue in office until the 2000 and 2001
Annual Meetings, respectively.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them FOR the three nominees recommended by the Board of Directors and named
below. Stockholders do not have the right to cumulate votes in the election of
directors. Directors are elected by a plurality of the votes cast at the
Annual Meeting. Thus, assuming a quorum is present, the three persons
receiving the greatest number of votes will be elected to serve as members of
the Board of Directors. Accordingly, non-votes with respect to the election of
directors will not affect the outcome of the election of directors. In the
event that any nominee for the Board of Directors is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the Board of Directors to fill
the vacancy, or the number of directors constituting the full Board of
Directors may be reduced. It is not expected that any nominee will be unable
or will decline to serve as a director.
A stockholder of the Company may nominate a person for election to the Board of
Directors. To do so, such stockholder must give written notice thereof,
containing the information required by the Company's Bylaws, to the Secretary
of the Company. Any such notice must be received at the principal executive
office of the Company not later than the close of business on May 24, 1999. In
the event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them FOR the nominees
recommended by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE FOLLOWING NOMINEES
AS DIRECTORS OF THE COMPANY.
NOMINEES FOR DIRECTORS
CLASS I - SERVING UNTIL 2002 ANNUAL MEETING
ROBERT A. BORNS, age 63, has been a director of the Company since 1996. He has
served as Chairman of Borns Management Corporation (real estate owners and
managers), Indianapolis, Indiana since 1962 and as Chairman of Correctional
Management Company, L.L.C. (privatized correctional facilities), Indianapolis,
Indiana since 1996. Mr. Borns serves on numerous boards, including IPALCO
Enterprises, Inc., Indianapolis Power & Light Company, and Artistic Media
Partners, Inc. He is also a member of the Board of Trustees of Indianapolis
Museum of Art, Indianapolis Symphony Orchestra, Indiana University Foundation
and St. Vincent Hospital Advisory Board.
JERRY E. FRANCIS, 49, has been a director of the Company since March 1998. He
is currently President of Savers Marketing Corporation. He had served as a
Senior Vice President of Savers Life Insurance Company ("Savers") since 1991.
He was Director of Operations of Savers from 1982 to 1998 and a director of
Savers from 1991 to 1998. Mr. Francis received his MBA from Wake Forest
University in 1982.
RAYMOND J. OHLSON, age 48, has served as Executive Vice President and director
of the Company since December 1993. He has served a President and director of
Standard Marketing Corporation ("Standard Marketing") since August 1991. Since
June 1993, Mr. Ohlson has served as President of Standard Life. Mr. Ohlson
entered the life insurance business in 1971. While still in college, Mr.
Ohlson qualified for the Million Dollar Round Table and is now a life member.
He earned his CLU designation in 1980.
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
CLASS II - SERVING UNTIL 2000 ANNUAL MEETING
STEPHEN M. COONS, age 58, has been a director of the Company since August,
1989. Mr. Coons has been General Counsel and Executive Vice President of the
Company since March 1993 and has been Secretary of the Company since March
1994. He was of counsel to the law firm of Coons, Maddox & Koeller from March
1993 to December 31, 1995. Prior to March 1993, Mr. Coons was a partner with
the law firm of Coons & Saint. He has been practicing law for 28 years. Mr.
Coons served as Indiana Securities Commissioner from 1978 to 1983.
MARTIAL R. KNIESER, age 56, has been a director of the Company since May 1990.
He was Medical Director of Community Hospital Indianapolis from 1978 to 1989
and has been Medical Director of Stat Laboratory Services from 1989 to present.
Dr. Knieser also has been Medical Director of Standard Life since December
1987.
PAUL ("PETE") B. PHEFFER, age 48, has been Executive Vice President, Chief
Financial Officer and Treasurer of the Company since May 1997 and director of
the Company since June 1997. Prior to joining the Company, Mr. Pheffer was
Senior Vice President - Chief Financial Officer and Treasurer of Jackson
National Life Insurance Company from 1994 to 1996 and prior to that was Senior
Vice President - Chief Financial Officer at Kemper Life Insurance Companies
from 1992 to 1994. Mr. Pheffer, a CPA, received his MBA from the University of
Chicago in 1988.
CLASS III - NOMINEES TO SERVE THREE YEARS UNTIL 2001 ANNUAL MEETING:
JOHN J. DILLON, age 40, has been a director of the Company since March 1998.
Mr. Dillon has been with Analytical Surveys, Inc. since January 1997, most
recently serving as Chief Administrative Officer. Prior to that, Mr. Dillon
served in various positions for the State of Indiana, including director of the
Hoosier Lottery from July 1993 to January 1997 and Insurance Commissioner from
July 1989 to July 1991.
RONALD D. HUNTER, age 47, has been the Chairman of the Board, Chief Executive
Officer and President of the Company since its formation in June 1989 and the
Chairman of the Board and Chief Executive Officer of Standard Life Insurance
Company of Indiana ("Standard Life") since December 1987. Previously, Mr.
Hunter held several management and sales positions in the life insurance
industry with a number of companies including Conseco, Inc. (1981-1986), and
Aetna Life & Casualty Company (1978-1981).
EDWARD T. STAHL, age 52, has been Executive Vice President of the Company since
its formation, has been a Director of the Company since July 1989, had served
as Director of Corporate Development since June 1993 and was appointed Chief
Administrative Officer in November 1998. Mr. Stahl was Secretary of the
Company from June 1989 to March 1994. Mr. Stahl was President and Chief
Operations Officer of Standard Life from May 1988 to June 1993. He has been a
Director of Standard Life since December 1987, and Executive Vice President and
Secretary since June 1993. Mr. Stahl has served in various capacities in the
insurance industry since 1966. He earned his FLMI designation in 1981, and is
a member of several insurance associations.
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met six times in 1998, each time pursuant to a regularly
scheduled meeting. No director attended fewer than 86% of the meetings of the
Board of Directors or committees on which he served. It is the primary
responsibility of the Board of Directors to oversee the management of the
business of the Company. To assist in carrying out its responsibilities, the
Board of Directors has established four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee and the Incentive
Stock Option Plan Committee. The latter is a committee of the whole. The
Executive Committee serves as the Nominating Committee.
EXECUTIVE AUDIT COMPENSATION
R. Hunter* J. Dillon* M. Knieser*
S. Coons R. Borns R. Borns
R. Ohlson M. Knieser J. Dillon
P. Pheffer
E. Stahl
___________________
* Chairman
The principal function of the Executive Committee is acting for the Board of
Directors in the management of business when action is required between Board
of Directors meetings. The committee meets as necessary, and all actions by
the committee are reported at the next Board of Directors meeting. The
Executive Committee met twice during 1998.
The Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent auditors and recommends the
appointment of independent auditors to the Board of Directors. In addition,
the committee also monitors the effectiveness of the audit effort and financial
reporting and the adequacy of financial and operating controls. The Audit
Committee met once during 1998.
The Compensation Committee approves compensation objectives and policy for all
employees and is responsible for developing and making recommendations to the
Board of Directors with respect to the Company's executive compensation
policies. In addition, the Compensation Committee determines periodically and
recommends to the Board of Directors the base cash compensation for the Chief
Executive Officer and other executive officers of the Company. The committee
reports to stockholders on executive compensation items as required by the
Securities and Exchange Commission. The Compensation Committee met twice
during 1998.
The Incentive Stock Option Committee has responsibility for granting stock
options to eligible members of management under, and otherwise administers the
Amended and Restated 1992 Stock Option Plan (the "Stock Option Plan"). The
Incentive Stock Option Plan Committee met once during 1998.
<PAGE>
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives an annual cash retainer of
$10,000. Non-employee directors of the Company receive $1,000 per Board of
Directors or Board of Directors Committee meeting attended in person. All non-
employee directors are reimbursed for expenses incurred in connection with
their services as directors. Pursuant to the Stock Option Plan, each non-
employee director is entitled to receive, on the date of each Annual Meeting,
an immediately exercisable option to purchase 500 shares of Common Stock at a
purchase price equal to the fair market value of Common Stock on the date of
the grant. The Board of Directors may vary, from year to year, the number of
shares subject to options granted to each non-employee director, provided that
such number may not be less than 500. Each such option will be exercisable for
ten years and may terminate earlier upon termination of directorship.
Effective June 10, 1998, the Board of Directors granted options to its non-
employee directors as follows: Dr. Bhat - 500, Mr. Borns - 500, Mr. Dillon -
10,500 and Dr. Knieser - 500. The Stock Option Plan also provides that each
non-employee director is entitled to receive an option to purchase 500 shares
of Common Stock upon commencement of service as a director. Officers of the
Company do not receive an annual retainer, meeting fees, shares of Common Stock
or other compensation for service as directors of the Company or for service on
Committees of the Board of Directors.
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors approves compensation
objectives and policy for all employees and is responsible for developing and
making recommendations to the Board of Directors with respect to the Company's
executive compensation policies. In addition, the Compensation Committee
determines periodically and recommends to the Board of Directors the base cash
compensation for the Chief Executive Officer and other executive officers of
the Company.
EXECUTIVE COMPENSATION PHILOSOPHY.
The objectives of the Company's executive compensation program are to:
ASupport the achievement of desired Company performance.
AProvide compensation that will attract and retain superior talent and reward
performance, which is critical to both the short-term and long-term success of
the Company.
AAlign the executive officers' interests with the success of the Company by
placing a portion of pay at risk with payout dependent upon corporate
performance.
The executive compensation program provides an overall level of compensation
opportunity believed to be competitive within the life insurance industry, as
well as with a broader group of companies of comparable size and complexity.
Actual compensation levels may be greater or less than average competitive
levels in surveyed companies based upon annual and long-term performance of the
Company as well as individual performance. The Compensation Committee uses its
discretion to set executive compensation at levels warranted in its judgment by
external, internal or individual circumstances.
EXECUTIVE OFFICER COMPENSATION PROGRAM.
The Company's executive officer compensation program is comprised of three
major components, all of which are intended to attract, retain and motivate
highly effective executives.
1. BASE SALARY. Base salary levels for the Company's executive officers are
competitively set relative to companies in the insurance industry and other
comparable companies. In determining salaries, the Committee also takes into
account individual experience and performance and specific issues particular to
the Company. These salaries are embodied in employment agreements negotiated
with the Company's executive officers. See "- Executive Compensation -
Employment Agreements."
2. CASH INCENTIVE COMPENSATION. Cash incentive compensation is designed to
motivate executives to attain short-term and long-term corporate goals. Annual
cash bonuses depend upon attainment of specified business goals. The
Compensation Committee's policy is to have a significant portion of an
executive's total potential cash compensation tied to the Company's overall
expected performance.
3. LONG-TERM INCENTIVE COMPENSATION. Long-term incentive compensation is
provided to executives and other employees through the Stock Option Plan. The
objectives of the Stock Option Plan are to align executive and stockholder
long-term interests by creating a strong and direct link between executive pay
and stockholder return, and to enable executives to develop and maintain a
significant, long-term ownership position in Common Stock.
The Stock Option Plan authorizes a grant of stock options, within the total
number of shares authorized, to eligible officers and other key employees. The
amount of Common Stock subject to any award made under the Stock Option Plan is
a function of salary and position in the Company. As with the determination of
base salaries and cash incentive compensation, the Incentive Stock Option Plan
Committee exercises subjective judgment and discretion in view of its general
policies. The Company's long-term performance ultimately determines
compensation from stock options, since gains from stock option exercise are
entirely dependent on the long-term growth of the Company's stock price.
Awards are made at a level calculated to be competitive within the life
insurance industry as well as a broader group of companies of comparable size
and complexity.
Section 162(m) of the Internal Revenue Code of 1986, as amended, disallows a
public company's compensation deduction with respect to certain highly-
compensated executives in excess of $1,000,000 unless certain conditions are
satisfied. The Company presently believes that this provision is unlikely to
become applicable in the near future to the Company because the levels of base
salary and annual cash incentive compensation of the Company's executive
officers are substantially less than $1,000,000 per annum. Therefore, the
Company has not taken any action to adjust its compensation plans or policies
in response to Section 162(m).
OTHER EXECUTIVE COMPENSATION.
The Company provides programs to the executive officers that are generally
available to all employees of the Company including a 401(k) plan and medical
benefits.
CHIEF EXECUTIVE OFFICER COMPENSATION.
Mr. Hunter was appointed to the position of Chairman of the Board, Chief
Executive Officer and President during 1989. The compensation of Mr. Hunter is
established by the terms of his employment contract, dated January 1, 1989, as
amended. Under his employment contact, a portion of his cash compensation is
tied directly to the Company's financial performance, because his annual cash
bonus is a fixed percentage (3 percent) of the Company's annual gross operating
income. During 1998, Mr. Hunter's annual base salary rate was increased from
$325,911 to $332,755. Mr. Hunter's incentive bonus in 1998 was $306,221 in
accordance with his employment agreement.
Martial R. Knieser, Chairman
Robert A. Borns
John J. Dillon
Members of the Compensation Committee
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and certain other components of the
compensation paid to Mr. Hunter, Chairman, Chief Executive Officer and
President of the Company, and the four other highest-paid executive officers of
the Company during fiscal year 1998 (the "Named Executive Officers") for the
Company's last three fiscal years:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
FISCAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER (1) UNDERLYING OPTIONS COMPENSATION (2)
Ronald D. Hunter..................1998 $332,755 $306,221 $45,579 -- $29,045
Chairman of the Board 1997 325,911 184,724 9,997 105,000 40,042
CEO and President 1996 316,418 171,996 -- 272,895 28,645
Raymond J. Ohlson.................1998 227,826 153,111 -- -- 21,240
Executive Vice President and 1997 223,140 92,362 -- 65,000 18,130
Chief Marketing Officer 1996 211,984 85,998 -- 85,260 12,796
Paul B. Pheffer...................1998 204,200 153,111 -- -- 15,658
Executive Vice President, 1997 133,333 -- -- 150,000 4,500
Chief Financial Officer and
Treasurer(3)
Stephen M. Coons..................1998 200,000 153,111 -- -- 10,897
Executive Vice President, 1997 167,355 92,362 -- 60,000 --
General Counsel and Secretary 1996 162,481 85,998 -- 85,260 --
Edward T. Stahl...................1998 128,219 153,111 -- -- 10,856
Executive Vice President and 1997 125,582 92,362 -- 60,000 6,000
Administrative Officer 1996 121,924 85,998 -- 77,070 6,000
</TABLE>
_____________________
(1)Amounts include imputed interest on an interest-free loan made to Mr. Hunter
in 1997. The balance of the loan at December 31, 1998 is $778,000.
(2)Amounts reported for fiscal year 1998 were as follows: (i) matching
contributions by the Company to the 401(k) plan (Mr. Hunter $6,000, Mr. Ohlson
$6,000, Mr. Pheffer $6,000, Mr. Coons $4,897, Mr. Stahl $4,856); (ii) key man
life insurance premiums paid by the Company (Mr. Hunter $4,090, Mr. Ohlson
$3,785, Mr. Pheffer $835); (iii) disability income insurance premiums paid by
the Company (Mr. Hunter $6,955, Mr. Ohlson $5,455, Mr. Pheffer $2,823); and
(iv) travel allowance paid by the Company (Mr. Hunter $12,000, Mr. Ohlson
$6,000, Mr. Pheffer $6,000, Mr. Coons $6,000, Mr. Stahl $6,000).
No 1996 compensation information is reported for Mr. Pheffer because he
commenced employment on May 1, 1997. Mr. Pheffer does not have an employment
agreement with the Company.
<PAGE>
No stock options were granted to or exercised by Named Executive Officers
during fiscal year 1998. The following table sets forth information with
respect to Named Executive Officers concerning unexercised options held as of
the end of fiscal year 1998. The Company has not issued any Stock Appreciation
Rights ("SARs").
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Ronald D. Hunter......473,095 35,000 415,531 17,500
Raymond J. Ohlson.....260,788 21,667 244,330 10,834
Paul B. Pheffer.......100,000 50,000 131,250 65,625
Stephen M. Coons......177,760 20,000 191,365 10,000
Edward T. Stahl.......169,570 20,000 191,365 10,000
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Hunter, Ohlson, Coons and
Stahl, which provide that, if their employment is terminated due to certain
acts, for a period of one year thereafter, each shall not (i) sell or attempt
to sell, within Indiana, any type of products marketed by the Company, (ii)
sell or attempt to sell any types of products marketed by the Company to any
customer of the Company and (iii) within Indiana, own, be employed by, or be
connected in any manner with any business similar to the type of business of
the Company. Messrs. Hunter, Ohlson, Coons and Stahl also agree that during
the employment term and for a period of six months thereafter, each will assign
to SMC or its nominees all of his right, title and interest in and to all
technical information that each makes, develops or conceives.
Mr. Hunter's employment agreement terminates on January 1, 2000. His salary
under his employment agreement for 1998 was $332,755 per year and is increased
each year by the percent change of the Consumer Price Index ("CPI"). In
addition, Mr. Hunter receives a bonus equal to 3% of the annual gross operating
income of the Company, but not less than 10% of his annual salary. Following a
termination of his employment with the Company in the event of a change-in-
control, Mr. Hunter will also be entitled to receive a lump sum payment equal
to the amount determined by multiplying the number of shares of Common Stock
subject to unexercised stock options previously granted by the Company and held
by Mr. Hunter on the date of termination, whether or not such options are then
exercisable, and the highest per share fair market value of the Common Stock on
any day during the six-month period ending on the date of termination. Upon
payment of such amount, such unexercised stock options will be deemed to be
surrendered and canceled. In the event of a change-in-control of the Company
whereby Mr. Hunter's employment is terminated, Mr. Hunter is entitled to a lump
sum payment equal to his average annual compensation times 299%.
Mr. Ohlson's employment agreement terminates on June 16, 2000. His salary
under his employment agreement for 1998 was $227,826 per year, and is increased
each year by the percent change of the CPI. In addition, Mr. Ohlson receives a
bonus equal to 1 2% of the annual gross operating income of the Company but not
less than 10% of his annual salary. Following a termination of his employment
with the Company in the event of a change-in control, Mr. Ohlson will also be
entitled to receive a lump sum payment equal to the amount determined by
multiplying the number of shares of Common Stock subject to unexercised stock
options previously granted by the Company and held by Mr. Ohlson on the date of
termination, whether or not such options are then exercisable, and the highest
per share fair market value of the Common Stock on any day during the six month
period ending on the date of termination. Upon payment of such amount, such
unexercised stock options will be deemed to be surrendered and canceled. In
the event of a change-in-control of the Company whereby Mr. Ohlson's employment
is terminated, Mr. Ohlson is entitled to a lump sum payment equal to his
average annual compensation times 299%.
Mr. Coons' employment agreement terminates on March 1, 2000. His salary under
his employment agreement for 1998 was $200,000 per year, and is increased each
year by the percent change of the CPI. In addition, Mr. Coons receives a bonus
equal to 1 2% of the annual gross operating income of the Company but not less
than 10% of his annual salary. Following a termination of his employment with
the Company in the event of a change-in-control, Mr. Coons will also be
entitled to receive a lump sum payment equal to the amount determined by
multiplying the number of shares of Common Stock subject to unexercised stock
options previously granted by the Company and held by Mr. Coons on the date of
termination, whether or not such options are then exercisable, and the highest
per share fair market value of the Common Stock on any day during the six month
period ending on the date of termination. Upon payment of such amount, such
unexercised stock options will be deemed to be surrendered and canceled. In
the event of a change-in-control of the Company whereby Mr. Coons' employment
is terminated, Mr. Coons is entitled to a lump sum payment equal to his average
annual compensation times 299%.
Mr. Stahl's employment agreement terminates on January 1, 2000. His salary
under this employment agreement for 1998 was $128,219 and is increased each
year by the percent change of the CPI. In addition, Mr. Stahl receives a bonus
equal to 1 2% of the annual gross operating income of the Company, but not less
than 10% of his annual salary. Following a termination of his employment with
the Company in the event of a change-in-control, Mr. Stahl will also be
entitled to receive a lump sum payment equal to the amount determined by
multiplying the number of shares of Common Stock subject to unexercised stock
options previously granted by the Company and held by Mr. Stahl on the date of
termination, whether or not such options are then exercisable, and the highest
per share fair market value of the Common Stock on any day during the six month
period ending on the date of termination. Upon payment of such amount, such
unexercised stock options will be deemed to be surrendered and canceled. In
the event of a change-in-control of the Company whereby Mr. Stahl's employment
is terminated, Mr. Stahl is entitled to a lump sum payment equal to his average
annual compensation times 299%.
<PAGE>
The following table sets forth certain information concerning the repricing of
stock options held by any executive officer during the five completed fiscal
years since the Company became a reporting company under the Exchange Act. The
Company has not issued any SARs.
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Exercise Option Term
Underlying Price Price at Remaining
Options/ of Stock at Time of at
SARS Time of Repricing New Date of
Repriced or Repricing or or Exercise Repricing or
NAME AND PRINCIPAL POSITION DATE Amended Amendment Amendment Price Amendment
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Hunter 5/1/96 105,000 $4.375 $9.41 $7.238 86 months
Chairman of the Board 99,645 4.375 7.62 7.238 91 months
CEO and President
Raymond J. Ohlson 5/1/96 26,250 4.375 12.38 7.238 82 months
Executive Vice President and 39,375 4.375 9.41 7.238 86 months
Chief Marketing Officer 37,380 4.375 7.62 7.238 91 months
Stephen M. Coons 5/1/96 26,250 4.375 9.41 7.238 86 months
Executive Vice President, 24,885 4.375 7.62 7.238 91 months
General Counsel and Secretary
Edward T. Stahl 5/1/96 22,050 4.375 9.41 7.238 86 months
Executive Vice President and 20,895 4.375 7.62 7.238 91 months
Director of Corporate Development
</TABLE>
<PAGE>
PERFORMANCE GRAPH
The following performance graph reflects a five-year comparison of
cumulative total shareholder return on the assumption that $100 was
invested on December 31, 1993 in each of i) the Company's common stock, ii)
the Russell 2000 index and iii) the NASDAQ Insurance Stock Index. In
previous years, comparison was made to the NASDAQ U.S. Stock Market Index,
rather than the Russell 2000 Index. Management believes that the Company
and its capitalization better match the characteristics and market
capitalization of the companies that compose the Russell 2000 index rather
than the NASDAQ U.S. Stock Market Index. Management believes that a number
of factors, including primarily the concentration of technology and
internet issues contained in the NASDAQ U.S. Stock Market Index rendered
that index less comparable to the Company than the Russell 2000 index. The
NASDAQ U.S. Stock Market Index had the following annual valuation points
for the five years ending December 31, 1998: 100, 98, 138, 170, 209 and
294.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG SMC, RUSSELL 2000 INDEX AND NASDAQ INDEX
[CAPTION]
Measurement period
(Fiscal year covered) SMC Russell 2000 Nasdaq Insurance
Index Index
Measurement PT -
12/31/93 $100 $100 $100
FYE 12/31/94 $42 $97 $94
FYE 12/31/95 $62 $122 $134
FYE 12/31/96 $71 $140 $152
FYE 12/31/97 $95 $169 $224
FYE 12/31/98 $101 $163 $199
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company Charter and Bylaws provide for indemnification of its officers and
directors to the maximum extent permitted under the Indiana Business
Corporation Law (AIBCL@). In addition, the Company has entered into separate
indemnification agreements with some of its directors which may require the
Company, among other things, to indemnify them against certain liabilities that
may arise by reason of their status or service as directors to the maximum
extent permitted under the IBCL.
On October 28, 1997, the Company made an interest free loan to Mr. Hunter,
Chairman of the Board of the Company, in the amount of $778,000, representing a
new loan in the sum of $438,000 and consolidation of an existing loan. The
loan is repayable within 10 days of Mr. Hunter's voluntary termination or
resignation as Chairman and CEO of the Company. In the event of a termination
of Mr. Hunter's employment with the Company following a change in control, the
loan is deemed to be forgiven.
SMC issued Series A convertible redeemable preferred stock ("Series A Preferred
Stock") during 1998. Certain officers and directors purchased 26,000 shares of
the Series A Preferred Stock. Purchases were financed by personal loans to the
participants from a bank. Such loans were collateralized by the Series A
Preferred Stock purchased. The Company guaranteed the loans, but has recourse
to the participants if it incurs a loss under the guarantee. A total of 10
directors and officers of the Company and its subsidiaries elected to purchase
Series A Preferred Stock. At December 31, 1998, the bank loans guaranteed by
the Company totaled $2,600,000. At December 31, 1998, the outstanding
principal balances of the bank loans to the directors and named officers which
are guaranteed by the Company were as follows: Mr. Hunter, $500,000; Mr.
Ohlson, $500,000; Mr. Pheffer, $100,000; Mr. Coons, $200,000; Mr. Stahl,
$100,000; Mr. Borns, $500,000; and Mr. Francis, $100,000.
<PAGE>
COMMON STOCK OWNERSHIP OF DIRECTORS, DIRECTOR NOMINEES, EXECUTIVE OFFICERS AND
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock; (i) by each stockholder known by the Company to own
beneficially more than five percent (5%) of the outstanding Common Stock; (ii)
by each of the Company's directors; (iii) by each of the Company's Named
Executive Officers and (iv) by all directors and Named Executive Officers of
the Company as a group. This information is as of March 31, 1999 based upon
Schedules 13-G filed with the Securities and Exchange Commission.
NUMBER OF SHARES
NAME OWNED (1) PERCENT (2)
Ronald D. Hunter 741,292(3) 9.16%
9100 Keystone Crossing
Indianapolis, Indiana 46240
Martial R. Knieser 388,278(4) 5.07
Raymond J. Ohlson 344,129 4.37
Stephen M. Coons 223,817(5) 2.88
Edward T. Stahl 217,489 2.81
Robert A. Borns 129,823 1.70
Paul B. Pheffer 113,552 1.48
Jerry E. Francis 56,167 __*
John J. Dillon 15,500 __*
All directors and Named Executive
Officers as a group
(nine persons) 2,230,047 24.48
Conseco Group 1,740,038(6) 18.71
11815 N. Pennsylvania Street
Carmel, Indiana 46032
_____________________________
* Less than one percent
<PAGE>
(1)Except as otherwise noted below, each person named in the table possesses
sole voting and sole investment power with respect to all shares of common
stock listed in the table as owned by such person. Shares beneficially owned
include shares that may be acquired pursuant to the exercise of outstanding
options, warrants or convertible securities that are exercisable within 60 days
of March 31, 1999 as follows: Mr. Hunter - 531,918, Dr. Knieser - 101,923, Mr.
Ohlson - 319,612, Mr. Coons - 201,289, Mr. Stahl - 181,334, Mr. Borns - 79,823,
Mr. Pheffer - 111,764, Mr. Francis - 11,764, Mr. Dillon - 10,500, directors and
Named Executive Officers as a group -1,549,927.
(2)Percentage of total outstanding shares is calculated separately for each
person on the basis of the actual number of outstanding shares as of March 31,
1999 and assumes, for purposes of the calculation, that shares issuable upon
exercise of options or warrants exercisable and securities convertible within
60 days held by such person (but no other stockholders) had been issued as of
such date. Percentages less than 1% are not indicated.
Includes 336 shares beneficially owned by Mr. Hunter's minor child, as to which
Mr. Hunter disclaims beneficial ownership.
(4)Includes 8,043 shares beneficially owned by Dr. Knieser's spouse and
children, as to which shares Dr. Knieser disclaims beneficial ownership.
(5)Includes 2,100 shares beneficially owned by Mr. Coons' child, as to which
shares Mr. Coons disclaims beneficial ownership.
(6)Includes 760,670 shares issuable upon conversion of a $4,371,573 convertible
note with Conseco Variable Insurance Company, 631,360 shares issuable upon
conversion of a $3,628,427 convertible note with Conseco Health Insurance
Company, and 348,008 shares issuable upon conversion of a $2,000,000
convertible note with Conseco Senior Health Insurance Company, all of which are
convertible at any time. Information with respect to Conseco Variable
Insurance Company, Conseco Health Insurance Company and Conseco Senior Health
Insurance Company ("Conseco Group") is based solely on a review of statements
on Schedule 13G filed by such entities with the Securities and Exchange
Commission. All of these entities are beneficially owned by Conseco, Inc. All
of the shares, when issued, will be subject to a Voting Trust Agreement by and
among the Conseco Group, the Company and two voting trustees appointed by the
Company and the Conseco Group. It is anticipated that Mr. Hunter will be the
Company Trustee.
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP has been selected by the Board of Directors to be the
independent auditors to audit the consolidated financial statements of the
Company for fiscal year 1999. This firm has been employed by the Company in
that capacity continuously since the Company's formation in 1989.
Representatives of Ernst & Young LLP will be present at the Annual Meeting,
will be given an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions relating to the audit of the
Company's 1998 consolidated financial statements.
STOCKHOLDER PROPOSALS
A stockholder of the Company may bring business before the Annual Meeting. To
do so, such stockholder must give written notice thereof, containing the
information required by the Company's Bylaws, to the Secretary of the Company.
Any such notice must be received at the principal executive office of the
Company not later than the close of business on May 24, 1999.
The Company's 2000 Annual Meeting is expected to be held on or about May 16,
2000. In order to be considered for inclusion in the Company's Proxy Statement
for its 2000 Annual Meeting, a stockholder's proposal must be received by the
Company within a reasonable time before solicitation of proxies for such
meeting is made. Such proposals may be included in next year's Proxy Statement
if they comply with certain rules and regulations promulgated by the Securities
and Exchange Commission.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent
(10%) of the Common Stock ("Reporting Persons"), to file reports of ownership
and changes in ownership with the Securities and Exchange Commission.
Reporting Persons are required by the Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) reports
they file. Based solely on its review of the copies of such forms received by
it and written representations from certain Reporting Persons, the Company
believes that during fiscal 1998 its Reporting Persons complied with all filing
requirements applicable to them.
ANNUAL REPORT
The Company's Annual Report for 1998 is being mailed to the stockholders with
this Proxy Statement, but is not part of the proxy solicitation material.
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other matters, other than those stated
above, to be presented at the Annual Meeting, but if any other matters should
properly come before the meeting, it is intended that the persons named in the
accompanying proxy card will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Stephen M. Coons
Executive Vice President and Secretary
<PAGE>
PROXY
STANDARD MANAGEMENT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 10, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Standard Management Corporation ( the
"Company" or "SMC") does hereby acknowledge receipt of Notice of said Annual
Meeting and the accompanying Proxy Statement and does hereby constitute and
appoint Ronald D. Hunter and Stephen M. Coons, or either of them, with full
power of substitution, to vote all shares of Common Stock of SMC that the
undersigned is entitled to vote, as fully as the undersigned could do if
personally present, at the Annual Meeting of Stockholders of SMC, to be held on
Thursday, June 10, 1999 at 9:30 a.m. (Eastern Standard Time) at The
Indianapolis Marriott North, 3645 River Crossing Parkway, Indianapolis, Indiana
46240, and at any adjournment thereof, as follows:
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES FOR DIRECTOR (AS DEFINED BELOW) IN PROPOSAL 1. IF OTHER
BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY WILL BE VOTED ON THOSE
MATTERS IN ACCORDANCE WITH THE BEST JUDGMENT OF THE NAMED PROXIES.
PLEASE MARK BOX * OR [X]
1. The election of three (3) Class I Directors:
[ ] FOR the nominees listed [ ] WITHHOLD AUTHORITY for the nominees
listed
Robert A. Borns Jerry E. Francis Raymond J. Ohlson
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE THAT NOMINEE'S NAME FROM THE NAMES LISTED ABOVE.
You are urged to mark, sign, date and return your proxy without delay in
the return envelope provided for that purpose, which requires no postage if
mailed in the United States.
Dated: , 1999
Signature
Signature if held jointly
When signing the proxy, please take care to have the signature conform to the
stockholder's name as it appears on this side of the proxy. If shares are
registered in the names of two or more persons, each person should sign.
Executors, administrators, trustees and guardians should so indicate when
signing. Corporations and partnerships should sign in their full corporate or
partnership names by a duly authorized person.
